Land Rent and the Transition to the Capitalist Mode of Production

David Harvey Johns Hopkins University

The social interpretation to be put upon land rent still remains a matter of controversy in the Marxist literature. Theoretical difficulties arise because it is hard to explain a payment made to land (as opposed to the improvements embedded in the land through human labor) on the basis of a theory of value in which human labor is key. In addition, any solution proferred to this theoretical conundrum must be robust enough to handle a wide diversity of material circumstances - the payments made to landlords by poor peasants hungry for land, oil rich potentates seeking prestigious penthouses in the worlds capital cities, industrialists seeking adequate sites for production, builders seeking land for development, migrants seeking room and board in the city, etc. The despair generated in the face of such difficulties has led some, such as Pierre-Philippe Rey, to argue that rent has no real basis within 2 capitalist mode of production and that it can be interpreted only as a relation of distribution which reflects a relation of production of pre-capitalist modes of production (e.g. Feudalism) with which capitalism is articulated. In what follows 1 shall concede the validity of Reys interpretation for the phase of transition from precapitalist to capitalist modes of production. But I shall dispute his conclusion that there is no basis for rent under a purely capitalist mode of production. I shall accept that rent is a relation of distribution but, like other forms of distribution (interest, taxes, profit on merchants capital) the appropriation of rent forms the basis for important coordinating functions, in particular the shaping of land uses and spatial configurations to the requirements of accumulation of capital and class reproduction. However, I shall also argue that serious misinterpretations can arise if we fail to distinguish between rent appropriated off the circulation of capital and from the circulation of revenues. Marxs categories were fashioned exclusively with respect to the circulation of capital, whereas much of the complexity we observe in practice (particularly though not exclusively in urban areas) arises as rents are appropriated from the circulation of revenues. One other point deserves consideration by way of introduction. Land has distinctive use values under any mode of production. Under capitalism, for example, it
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can function as an element, means, or condition of production, or simply be a reservoir of other use values (such as mineral resources). Exactly how these use values acquire political-economic significance depends upon the kind of society we are dealing with and the kinds of activities set in motion. In agriculture, for example, the land becomes a mea:is of production in the sense that a production process literallv flows through the soil itself. If the production process is organized by capitalists, then the soil becomes the conduit for the flow of capital through production, therefore a form of fixed capital (or land capital as Marx sometimes called it). When factories and houses are placed on the land, then that land is used as a condition of production(space), though for the building industry that puts them there in the first place land appears as an element of production. Land demands its tribute (as Marx puts it) in all of these different senses, but we must always bear in mind that the form and social meaning of rent varies according to these diverse forms of use.

1. RENT IN TRANSITIONAL SOCIAL FORMATIONS

The social interpretation to be put on rent varies from society to society and undergoes a fundamental alteration with the transition from one mode of production to another. In each historical epoch, Marx writes, property has developed differently and under a set of entirely different social relations (Poverty of Philosophy, p. 154). We will be grossly in error if we interpret feudal rents, or rents in the transitional phase when landed capital held sway, directly by reference to the role of rent in advanced capitalist society. Yet a knowledge of the latter is indispensable to an interpretation of the former. Furthermore, it is in the nature of the transition to merge two often quite antagonistic roles indistinguishably. The difficulty is, then, to keep the social interpretations distinct from each other while simultaneously understanding how they can coexist within the same money payment for the use of land. Only in this way can we understand how one form of rent is gradually converted into the other through a material historical process.

Marx considered that money rent on land a n d its corollary, the formation of land markets, was a precondition for the rise of capitalism. Like merchants capital and usury, landed capital precedes the modern standard form of capital. The latter ultimately subjugates these earlier forms and converts them to its own requirements. The actual history of this process is strewn with complexities generated out of the cross-currents of class struggle a n d the diversity of initial conditions of land tenure and ownership. Marxs general version of this history, based on the West European experience, can be divided into two phases. In the first, feudal labor rents (the source of a surplus product) are transformed into rent in kind and finally into a money payment, while land is increasingly released from those constraints which prevcnt i t being freely traded as a commodity. Furthermore, the conversion to money payments implies either a voluntary o r forcible integration of land users (particularly agricultural producers) into some kind of general system of commodity production and exchange. None of this ensures, however, that rent assumes its modern, purely capitalistic form, thoroughly integrated into the circulation of capital (and revenues). All kinds of intermediate forms can arise and here Reys conception of complex articulations of different modes of production, one upon the other, makes eminent sense. And when what Marx viewed as a n inevitable, though lengthy, transition is blocked for an extended period, as often a p pears t o be the case in third-world peasant societies, then Reys interpretation is crucial to the degree that it sheds light o n the material conditions and class configurations a n d alliances that freeze the transition in a half-way state between pre-capitalist and capitalist modes of production. None of this implies, however, acceptance of Reys conclusion that n o social basis exists within a purely capitalist mode of production for the appropriation of land rent. We will show how that conclusion can be refuted in the next section. But for the moment we will follow Reys perceptive line o f argument as it applies t o the transitional phase. Under transitional conditions landlords can play a direct a n d active role in the exploitation of labor (as opposed to the backseat, passive role which Marx assigned to them under capitalism). This is a s true for slave economies (the American South prior to the Civil War) as i t is for landlord-peasant systems of agricultural production in the present era. There is a direct incentive for the landlord to extract the maximum of rent (whether in kind or in money does not immediately concern us), not only because this maximizes the landlords revenues, but also because the peasant is forced to work harder and harder and produce more a n d more commodities for the market at ever lower prices (given the increase in supply). The massive exploitation of a rural peasantry by a landlord class is, from this standpoint, perfectly consistent with industrial capitalism all of the time it provides cheap food for workers a n d cheap raw materials for industry. And even if t h e peasants nominally own their own land (there is n o overt landlord class), indebtedness at usurious interest rates and the obligation to pay taxes t o the state can have the same effect. I t is not hard t o see how a powerful alliance of classes - comprising landowners, industrial bourgeoisie, money lenders, backed by the state - can
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form a n d block any full transition t o capitalist social relations on the land. But such a form of exploitation, like absolute surplus value (of which it is a bastard form) has negative social consequences and inherent limits. Firstly, the extraction of a fixed money payment from basically subsistence producers may diminish the supply of commodities when prices rise because producers have to sell less to reach a fixed money goal. Prices continue to rise as a consequence. When prices go down, on the other hand, peasants have t o sell more a n d so increase the supply in the face of falling prices. Price movements and commodity supplies d o not, under such conditions, integrate at all well with the general dynamic of accumulation. That dynamic, secondly, invariably requires a n expansion of output which, with a fixed technology of peasant production, means increasing rates of exploitation. And as exploitation increases so d o the conditions for revolutionary movements ripen. Even in the absence of such resistance, there is a n absolute limit to this kind of absolute exploitation. At some point the productive forces on the land have to be revolutionized to accommodate the expanding demands of capitalism. We then discover that the transitional forms of organization inhibit the development of the social productive forces of labour, social forms of labour, social concentration of capital . . . and the progressive application of science (Capilal, Volume 3, p. 807). New productive forces have to be deployed a n d that means opening u p the land lo the free flow of capital. This brings us to the second phase of Marxs version of the transition t o capitalist forms of rental appropriation. Capital and labor must confront each other on the land free from any direct interference of the landlord class. The landlord must be reduced to a purely passive figure. The class alliance between an industrial bourgeoisie and a landlord class breaks down and antagonistic relations arise between them, until such time as the latter class entirely disappears as a coherent force in society. And all of this must happen because this is the only way, under capitalism, for productive forces to be revolutionized on the land itself. W e can understand this transition from the standpoint of the landlord in the following way. The landlord can dominate a peasantry tied to the land and has everything to gain from maximizing the extraction of rent. But the landlord cannot similarly compel the capitalist to invest and therefore has much t o lose from maximizing the extraction of rent from the capitalist. The power of landed property then acts as a barrier to the free flow of capital onto the land and inhibits the development of the productive forces. The possibility exists, however, for a terrain of compromise between landowner and capitalist. The use value of land to the capitalist is as a n element, means or condition of production which, when worked on by labor, produces surplus value. The capitalist is concerned with rent in relation t o surplus value produced. The landlord, o n the other hand, is concerned with the rent per acre. Under conditions of strong capital flow onto the land, the rent per acre can rise while the rent as a portion of surplus value produced declines (cf. Capital, Volume 3, p. 683). Under these conditions, the landlord has everything to gain by lowering the barrier which land-

ed property places to the flow of capital. This was, of course, the basis of the compromise that existed in England during the period of high farming, 1850-73. The relationship between capital a n d landed property is not reduced thereby to one of perpetual harmony. I t is often hard to distinguish, for example, between peasant producers and small-scale capitalist Droducers. while landlords may not be sophisticated enough to appreciate the long-term gain to them of the shift from rack-renting peasants to seducing capitalists t o invest. Also, t o the degree that the expansion of social labor stimulates the demand for land itself, landed property acquires the capacity of capturing a n ever-increasing portion of surplus valuc (Cupilal, Volume 3, pp. 637-9). Blessed with such a n opportunity, what landlord could resist exploiting it? The landlord is perpetually caught between the evident foolishness of extracting t o o little from capital a n d the penalties which accrue from trying t o take too much. And there are, in addition, all kinds of institutional problems relating to permanent improvements, tenancy conditions, leasing arrangements, a n d the like, which are the focus of interminable struggles between capitalist and landlord. Like contractual issues which arise between capital a n d labor, these institutional a r rangements are ultimately regulated through the state. Marx evidently did not feel too secure in his rendition of how the capitalist form of private property came t o be. He was later to claim that he had merely sought to trace the path by which, in Western Europe, the capitalist economic system emerged from the womb of the feudal economic system a n d he attacked those who transformed his historical sketch of the genesis of capitalism into a n historico-philosophical theory of the general path of development prescribed by fate to all nations, whatever the historical circumstances in which they find themselves (Selecled Corresponder~ce, pp. 3 12-3 13). His studies of the evolution of landed property in the colonies and the United States, as well as Russia, convinced him that the transition was not unilinear. Even in Western Europe considerable variation existed in part because of residual features dragged over into modern times from the natural economy of the Middle Ages but also because of the uneven penetration of capitalist relations under historical circumstances showing infinite variations a n d gradations in appearance which demand careful empirical study (Capita,, Volume 3, pp. 787-93). Under such conditions even the neatness of the two-phase transition breaks down. We almost certainly will find radically different forms of rental appropriation side by side. Properly used, Marxs framework can provide many insights. For example, in a careful reconstruction of the historical record of rental appropriation in the Soissonais district of France, Postel-Vinay shows that over the last two centuries large scale farmers working the better land have consistently paid about half the rent per acre extracted from small peasant proprietors working inferior soils. In Reys eyes this makes a mockery of both Marxian and neo-classical views of differential rent (supposedly extracted from lands with superior productivity) and confirms his view that rent can be understood only as a feudal relation 01 production perpetuated as a capitalist relation oldistribution through a process of articulation.

Rey is only partially right in all of this. If my reading of Marx is correct, then the superior rents paid by peasants is a reflection of a landlord-labor relation as opposed to the landlord-capital relation found o n the better lands. T w o different social relationships co-exist within the same region for two centuries. Yet rent is still paid by capitalists according to a logic that has nothing to d o with the articulation of feudal and capitalist modes of produciton. Reys depiction of conditions during the transition (including blocked transitions which freeze social relations o n the land into landlord-laborer patterns) is quite appropriate. But he is way off target when he asserts that this is the only form that rent can take under capitalism. To back u p this argument we have to consider the social interpretation to be put o n the payment of land rent under a purely capitalist mode of production.

2. RENT AND THE CIRCULATION OF CAPITAL

The monopoly of private property in land is both a n historical premise and a continuing basis for the capitalist mode of production (Capital, Volume 3, p. 617). But Marxs interpretation of the role of rent under capitalism poses various conundrums. How can raw land, not itself a product of human labor, have a price (the appearance if not the reality of value)? How can i t be, furthermore, that landlords suddenly appear as a third major class right at the end of an analysis which rests on a two-class interpretation of capitalism? Marx, in what are admittedly preparatory writings, makes seemingly diametrically opposed statements on such crucial matters. O n the one hand he characterizes the value of land as a totally irrational expression, which can have n o meaning under pure capitalist social relations while o n the other he also characterizes ground rent as that form in which properly in land . . . produces value (Cupi/al, Volume 3, pp. 830-5; 618). In Tlieories of Surplus Value (Part 2, p. 152) he asserts that if the dominant class relation is between capital and labor, then the circumstances under which the capitalist in turn has to share a part of the . . . surplus-value which he has captured with a third, non-working person, are only of secondary importance, whereas i n Capi/a/ (Volume 3, p. 618) he discusses how wage labourers, industrial capitalists, and landowners constitute together in their mutual opposition, the framework of modern society. We have to make sense of all this somehow. We have t o follow Marx and try a n d construct a scientific analysis of ground-rent , of the independent and specific economic form of landed property on the basis of the capitalist mode of production in its pure form free of all distorting a n d obfuscating irrelevancies (Capital, Volume 3, p. 624). Let us make four basic assumptions t o this end. First, all transitional features (feudal residuals) have been eliminated. Secondly, that the rent on land can be clearly distinguished from all payments for commodities embodied in the land (land improvements, buildings, etc. which are the product of human labor). Thirdly, that the circulation of capital can be clearly distinguished from the circulation of revenues (we take up the latter topic in the next section). And, finally, assume land has a use value as a n element, means o r condition of production (rather than consumption). We are

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then in a position t o analyze land rent directly in relation to the circulation of capital. The best synoptic statement Marx provides of the continuing basis for land rent under capitalism is the following: Landed property has nothing to do with the actual process of production. Its role is confined to transferring a portion of the produced surplus value from the pockets of capital to its own. However, the landlord plays a role in the capitalist process of production not merely through the pressure he exerts upon capital, nor merely because large landed property is a prerequisite and condition of capitalist production since it is a prerequisite and condition of the expropriation of the labourer from the means of production, but particularly because he appears as the personification of one of the most essential conditions of production (Capital, Volume 3, p. 821). From this we can distinguish three distinctive roles. The expropriation of the laborer off the land was vital in the stage of primitive accumulation precisely because the land can always be used as a means of production. If labor is to be kept as wage labor, then the laborer has to be denied free access to the land. From this standpoint we can see the barrier which landed property puts between labor and the land as socially necessary to the perpetuation of capitalism. This function could just as well be performed, however, if the land became state property, the common property of the bourgeois class, of capital. The problem here is that many members of the bourgeoisie (including capitalists) are landowners, while an attack upon one form of property . . . might cast considerable doubt on the other form (Theories of Surplus Value, Part 2, pp. 44; 104). From this standpoint, rent can be regarded as a side-payment allowed t o landowners to preserve the sanctity and inviolability of private property in general and private ownership of the means of production in particular. This ideological, juridical and political aspect t o landed property is exceedingly important but not in itself sufficient to explain the capitalist forms of rent. The third role of private property, which turns out to be the most elusive t o pin down firmly, is crucial, therefore, to the social interpretation of land rent under capitalism. The key to the interpretation of the role of landed property under capitalism lies in the pressure it asserts upon the capitalist. The nature of the pressure varies according to the kind of rent extracted. Monopoly and absolute rents interfere with accumulation and arise only to the degree that landed property acts as a barrier to the free flow of capital. Absolute rent, Marx asserts, must eventually disappear (Capilal, Volume 3, p. 765; Theories of Surplus Value, Part 2, pp. 244; 393). And monopoly rents, to some degree unavoidable particularly in urban areas and on land of special qualities (including location), must be kept to a minimum. Absolute and monopoly rents are not the important categories. This conclusion runs counter to Marxs often-quoted assertions concerning the importance of absolute rent (see Selecled Corresporiderice, p. 134) but is consistent with the brief treatments he accords these concepts in Capiial and Theories of Surplus Value compared to the page after page given over to wrestling with the nature of differential rents. I therefore follow Fine in thinking that

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Marxs views on differential rent, particularly those partially worked out in Capital, are quite distinct from those of Ricardo and provide the clue to the true interpretation to be put upon land rent in relation to the circulation of capital. Marx follows Ricardo in distinguishing between two kinds of differential rent, but innovates by analyzing how the two forms of rent relate and serve simultaneously as limits for one another (Capital, Volume 3, p. 737). Marxs insights are hard to recuperate from chapters full of convoluted argument and elaborate arithmetic calculations. I shall simply summarize the most important features. Differential rent of the first type (DR-I) arises because producers on superior soils or in superior locations receive excess profits relative to production costs on the worst land in the worst locations. Superior soil and location, like superior technology, are indeed a source of relative surplus value to individual producers (which explains why all of them can appear as productive of value). But unlike superior technology, superior locations and soils can form relatively permanent sources of excess profits. If the latter are taxed away as rent, the profit rate is equalized across different soils and locations. Capitalists can then compete with each other only through adoption of superior techniques. Which pushes the capitalist system back onto its central track of looking to revolutions in the productive forces as the means to its salvation. The extraction of DR-I has a vital social function in relation to the dynamics of capital accumulation. Without it, some producers could sit complacently on the excess profits conferred by natural or locational advantages and fail i n their mission to revolutionize the productive forces on the land. This conception of DR-I, essentially no different from that of Ricardo, has to be modified in three important respects. First, trade-offs can exist between fertility and location so that the worst land has to be understood as a combination of characteristics. Secondly, both fertility and location are social appraisals and subject to modification either directly (through soil exhaustion or improvement, changing transport facilities, etc.) or indirectly (through changing techniques of production which have different land or locational requirements). The excess profits from superior soils or locations are permanent only in relation to changing appraisals. Thirdly, DR-1 depends upon a normal flow of capital into production on the land. And when we switch to consider what constitutes that normal flow of capital onto the land we immediately encounter the problem of the second kind of differential rent (DR-2). The immediate implication is that DR-I depends crucially on capital flows which automatically generate DR-2. Imagine a situation in whcih no advantages due to location or fertility existed. Differentials in productivity on the land would then be due solely to the different quantities of capital invested (assuming some pattern of returns to scale). Excess profits in this case are entirely due to the investment of capital. Conversion of these excess profits into DR-2 will simply check the flow of capital onto the land except under two particular conditions. First, if the investments embed relatively permanent productive forces in the land then the flow of capital

leaves behind a residue of improvements which form the basis for the appropriation of DR-1. Such residues (in the form of drained and cleared land, and other forms of land improvement) are widespread and of great importance. Secondly, the appropriation of DR-2 directly can, under the right circumstances, prevent the flow of capital down channels which might be productive of profit for the individual capitalist but which would have a negative impact upon the aggregate growth in surplus value production. We here encounter a classic situation in which individuals, left to their own devices and coerced by competition, would engage in investment strategies which would undermine the conditions for the reproduction of capitalist class as a whole. Under such conditions the external discipline imposed by landowners, like the external discipline exercised through the credit system, has a potentially positive effect in relation to the stabilization of accumulation. The emphasis, however, has to be upon the potentiality of this result because what Marxs tedious arithmetic examples appear to show is that the appropriation of DR-2 can exercise a negative, neutral or positive pressure upon the accumulation of capital depending upon the circumstance. Furthermore, the flow of capital onto the land also depends upon general conditions of accumulation - a plethora of capital in general or particular conditions prevailing within the credit system have direct implications for the flow of capital onto the land (Capital, Volume 3 pp. 770; 676). Now combine the interpretations of DR-I and DR-2. We will be seriously in error, as Fine points out, if we treat the two forms of rent as separate and additive. Insofar as DR-I depends on a social appraisal of natural and locational advantage it depends upon capital flows which often modify nature in crucial ways. The appropriation of DR-2, for its part, could not occur without DR-I as its basis. The two forms of differential rent in effect merge to the point where what is due to land (with the aim of equalizing the rate of profit and keeping the impulsion to revolutionize the productive forces engaged) and what is due to capital (with the aim of keeping the flow of capital into revolutioninzing the productive forces on the land at a level consistent with sustained accumulation) is rendered opaque. In other words, the appropriation of rent internalizes contradictory functions. The permanent tension between landed property and capitalists within a purely capitalistic mode of production is a reflection of this contradiction. Furthermore, to the degree that rental appropriation can have negative, neutral or positive effects in relation to accumulation, the social relations which arise in response to this contradiction can have a powerful effect upon the allocation of capital to land, the whole structure of spatial organization, and, hence, upon the overall dynamic of accumulation. In order to explore these contradictions and their effects, however, we must first establish the form that private property in land must assume if it is to be integrated within a purely capitalist mode of production, The conclusion t o which Marx points, without full explication, is that land must be treated as a pure financial asset and that land has to become a form of fictitious capital. This conclusion calls for some explanation. Fictitious capital amounts t o a property right

over some future revenue. Stocks and shares, for example, can be sold before any actual production takes place. The buyers trade their money in return for a share of the fruits of future labor. Insofar as the money is used to set labor in motion (or create conditions, such as physical infrastructures, to enhance the productivity of social labor), then the fictitious capital stands to be realized. Even under the best conditions, fictitious capital entails speculation and under the worst it provides abundant opportunity for fraud and devaluation. Capitalism could not function, however, without the large scale creation and movement of fictitious forms of capital via the credit system and capital markets. Only in this way can capital be shifted rapidly from unprofitable to profitable sectors and regions, new lines of activity opened up, centralization of capitals be achieved, etc. The credit system (capital markets in particular) becomes the central nervous system for the coordination of accumulation. It also becomes the central locus of all capitalisms internal contradictions. Crises always appear, in the first instance, therefore, as financial and monetary crises. Once the significance of fictitious forms of capital is established, we can see how it is that property rights over any form of future revenue might be bought and traded. Government debt (a right to a share of future taxes) and mortgages on land (a right to future rents) and property (a right to amortization payments) all stand to be freely traded. In the case of land, what is bought and sold is the title to the ground rent yielded by it. That ground rent, when capitalized at the going rate of interest, yields the land price. Hence arises an intimate relationship between rent and interest. The money laid out by the buyer of land is equivalent to an interest-bearing investment, a claim upon the future fruits of labor. Title to land becomes a form of fictitious capital, in principle no different from stocks and shares, government bonds, etc. (although it has certain qualities of security, illiquidity, etc.). Land, in short, can be regarded as a pure financial asset. This is the condition, I argue, which dictates the pure form of landed property under capitalism. The theory of ground rent tells us that landowners should ruthlessly appropriate all excess profits due to relatively permanent advantages of fertility or location (no matter whether the product of capital or not). Anticipated future excess profits (due to future capital flows and future labor) affect the price of land in the present insofar as land becomes a pure financial asset, a form of fictitious capital. Marx excluded such speculative activity from his purview (except in a few rare instances, e.g., Capital, Volume 3 , pp. 774-6) and was therefore content to view landownership as an entirely passive function. But land markets, like capital markets, play a vital coordinating role in the allocation of future capital and labor to the land. Landowners leave behind their passive stances and can play an active role in the creation of conditions which permit enhanced future rents to be appropriated. In so doing, of course, they condemn future labor to ever-increasing levels of exploitation in the name of the land itself. But they also play a vital role in relation to accumulation. Landowners can coerce or cooperate with capital to ensure the creation of enhanced ground rents in the future. By perpetually striving to put the land under its highest

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and best use, they create a sorting device which sifts land uses and forces allocations of capital and labor that might not otherwise occur. They also inject a fluidity and dynamism into the use o f land which would otherwise be hard to generate and so adjust the use of land to social requirements. They thereby shape the geographical structure of production, exchange and consumption, the technical and social division of labor in space, the socioeconomic spaces of reproduction, and invariably exert a powerful influence over investment in physical infrastructures (particularly transportation). They typically compete for that particular pattern of development, that particular bundle of investments and activities, which has the best prospect for enhancing future rents. In this way, as Marx puts it, rent, instead of binding man to nature, merely bound the exploitation of the land to competition (Poverfy of Philosophy, p, 159). We can now bring the argument full circle. Not only is thL qppropriation of rent socially necessary under capitalism by virtue of the key coordinating functions it performs, but landowners must also treat the land as a pure financial asset, a form of fictitious capital, and seek, thereby, an active role in coordinating the flow of capital onto and through the land. The effect is to free up the land to the circulation of interest-bearing capital and tie land markets and land uses into the general circulation process of capital. But by the same token, the more open the land market is, the more recklessly can surplus money capital build pyramids of debt claims and seek to realize these claims through the pillaging and destruction of the land itself. Investment in appropriation, so necessary if the land market is to perform its vital coordinating funcitons, simultaneously opens up the land to all manner of insane forms let loose within the credit system in general. What appears as a sane and sober device for coordinating the use of land to surplus value production and realization, can all too easily dissolve into a nightmare of incoherency and periodic orgies of insane speculation. Here, as elsewhere, the only ultimate form of rationality to which capitalism responds is the irrationality of crisis. We can, at this point, rest our case, There is, contrary to Reys assertion, a form of landownership and land rent which fully integrates with the circulation of capital. Land markets, like capital markets, do not produce value in the primary sense, but they play a vital role in coordinating the application of social labor. Capitalism simply would not work without them. And land markets could not exist without land rent, the appropriation of excess profit from capital. The crisis-prone character of capitalism is, of course, carried over and even heightened within the credit system as well as within land markets. The detailed study of the specific form these internal contradictions take within land markets is a n urgent matter. Yet all of this requires that land be treated as a pure financial asset, a form of fictitious capital. This requires that the power of an distinct class of landowners be broken, that ownership of land become from all standpoints (including psychological) simply a matter of choosing what kinds of assets to include in a general portfolio of investments. And this, of course, is increasingly how pension funds, insurance companies and even private individuals tend to view land investment. This is not to say that in practice all traditional forms of landownership

have disappeared in the advanced capitalist world. But it is interesting to note that land has for long been dominantly viewed as a pure financial asset in the United States (the country least hindered by feudal residuals) and that the direction of the transition in countries such as Britain has been very much towards the acceptance of land as a form of fictitious capital. The point, of course, is that these forms of landownership (and the social attitudes they generate) are entirely consistent with the circulation of capital, at the same time as they are fully expressive of the internal contradictions within that circulation process.

3. RENT AND THE CIRCULATION OF REVENUES

Within a purely capitalist mode of production, all forms of revenue - wages, profit of enterprise, interest, taxes, rent, etc. - have their origin in the production of value and surplus value. But, once distributed, revenues are free to circulate in a variety of ways thereby creating opportunities for various secondary forms of exploitation, including rental appropriation. Rents can, therefore, just as easily be appropriated from the circulation of revenues as from the circulation of capital itself. Landlords are presumably indifferent as to the immediate origin of the rental payment. They are satisfied as long as the rent keeps rolling in. But the theoretical distinctions are of interest because circumstances often arise, particularly though not exclusively in urban areas, where it is impossible to understand the social meaning of rental payments without taking account of the circulation of revenues. The intricacy of the circulation of revenues must first be established in order to illustrate the argument.

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The total wage bill in society, the share of variable capital in the total product, is fixed by an intersection between the requirements of accumulation and the requirements for the reproduction of labor power of a certain sort at a given standard of living (affected by historical, moral, and class struggle considerations). The principles of wage rate determination are intricate in their details and different factions of the proletariat receive more or less of their aliquot share of the total wage bill according to their reproduction needs and their gains through class struggle. Money wages are highly differentiated as a result. Capitalists, furthermore, do not normally discriminate as to the individual needs of their workers and pay them the going rate for the job. But individual worker needs vary enormously, depending upon family status, age, health, and, of course, tastes and fancies (which are just as much a part of working class culture as they are for the bourgeoisie). On a given day, therefore, some workers will possess money surpluses while others will be unable to meet their needs. Under these conditions we can expect a variety of money transactions within the working class. These money transactions amount to a circulation of revenues - in this case, a redistribution of wage payments. The money transactions can be of two basic types. First, payments for services rendered (baby-sitting, mending, washing, cleaning, etc.). Second, workers may borrow and lend to each other, sometimes at a rate of interest. The early benefit societies, savings and loan associations, building societies, etc., were simply attempts to institutionalize means to circulate revenues within the working class. The extent of such circulation varies, but i t can be quite massive. The social security system, for example, is simply a transfer from those now working to those now retired, in return for a claim on the wages of those employed in the future. Social security simply socialized the circulation of revenues within the working class and had nothing necessarily to d o with socializing the circulation of capital. Revenues can also circulate amongst various factions of the bourgeoisie. Units in surplus can lend to those in need (whether from want or fancy does not concern us). Services can be rendered from one segment of the bourgeoisie to another and intricate patterns of lending can also arise (read any tale of Balzac and Dickens to get some sense of the importance, socially, of this form of the circulation of revenues). The bourgeoisie may hire workers a t a going wage t o render the kinds of service that taste, fashion, custom, fancy, and income dictate. The cook, the valet and gardener are paid out of the circulation of revenues and not directly out of the circulation of capital. In this way, revenues can circulate between the social classes. Workers may likewise pay, or be forced to pay, for services rendered by the bourgeoisis (legal, administrative, etc.). They may also pay landlords for the right to occupy space. The circulation of revenues is, evidently, both intricate in its detail and massive in scale. Much of the detail of what happens in bourgeois society has to be understood in relation to it. We will be seriously in error if we seek to explain that detail by reference to Marxs theory of the dynamics of the circulation of capital. Let us clarify this argument.

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The circulation of revenues necessarily integrates with the circulation of capital at certain well-defined points. Under capitalism, all revenues have their origin in value and surplus value production and ultimately return to the circulation of capital through the purchase of commodities. If this aggregate relation does not hold then the circulation of capital would fail. Marx was sufficiently impressed with this requirement that he felt he could afford to relegate the redistributions achieved through the circulation of revenues to the background. In order to examine the general dynamics of accumulation, it was possible to rely upon simple aggregates. He was not wrong in proceeding thus. We simply must be careful not to extend his theoretical findings to domains which he explicity excluded from consideration. A cursory look at what happens in the domain of the circulation of revenues provides interesting insights. For example, to the degree that the speed of circulation of capital is vital to sustaining accumulation, extended wanderings of money through the circulation of revenues appears undesirable. In other words, time taken in revenue circulation is time lost from the standpoint of the circulation of capital. But we can then see that the circulation of revenues also performs important functions. In particular, it helps diminish voluntary and involuntary hoarding. If, for example, houses had to be bought for cash, and this was the only way in which the need for shelter could be satisfied, then the demand for housing would be held in check (and an important field of operation for capital constrained) and vast sums of money would be locked up as purchasers saved to buy their houses (the circulation of money as capital would also be held in check). Such a disasterous situation from the standpoint of accumulation can be relieved either by renting or by a credit system which allows individuals in surplus to lend to those in need. In both cases the circulation of revenues is facilitated, hoards are thereby reduced, and the free circulation of capital maximized. An inadequate structure for the circulation of revenues can therefore act as a barrier to the circulation of capital. State policy, particularly in its welfare aspects, has often been dedicated to creating more efficient structures for the circulation of revenues in relation to the circulation of capital. There is, in this, a certain convenience because the politics of the situation often lend themselves to exactly those reforms which appear to satisfy workers needs by rationalizing the circulation of revenues while leaving the circulation of capital if anything enhanced rather than diminished. The problem, of course, is that both the circulation of revenues and of capital occur as money transactions. It is not always easy to separate the two conceptually (hence the elaborate discussion over the distinction between productive and unproductive labor) and in daily life the distinction often disappears entirely. This is particularly true with respect to transactions within the credit system. If workers can lend to other workers at a rate of interest then why cant they also lend to capitalists, particularly if the rate of interest is higher? And if workers borrow, then what is to stop the rise of usurious practices within the working class, or the penetration of capitalist lending into working class consumption? Such phenomena are indeed observable and create antagonistic relations at

cross-purposes to the primary forms of exploitation which Marx dwells upon at such length. The problem arises here because the distinction between workers and capitalists is obscured within the credit system where the primary relation is between lenders and borrowers, debtors and creditors, of whatever sort. Distinctions can arise, of course, which relate back to the fundamental class position of those involved (it would be surprising if the credit system was organized solely to benefit workers, as opposed t o capitalists). And, furthermore, the rule that the circulation of revenues must accord somehow with the circulation of capital must always be observed. But the trap lies in the somehow because it turns out that there are all manner of diverse arrangements and roles which arise within the field of revenue circulation that give rise to all manner of secondary forms of exploitation. Consider, now, how this relates to the interpretation of rent. Any agent who controls land is in a position to use that land as a pure financial asset, to speculate in land price and to appropriate rent. If workers own small plots of land and the property thereon, they can just as well play this game as anyone else. Indeed, petty land and property trading or renting has been a prime means for upward mobility within the working class and the pettit bourgeoisie for centuries. And it continues to be of great social importance. Workers are notoriously protective of the housing they own as an investment and can even trade it for financial advantage if need be. It is a myth that the working class is only interested in the use value of the housing it occupies. The same is true of transitional social formations. If money is social power and land some form of financial asset, then the trading and renting of land plots and the consolidation of land ownership and control, becomes a critical feature to the creation of new power relations. Individuals and groups may try to take advantage of such possibilities to better their position in society. This is as true for pioneer settlers as it is for the working class homeowner, for squatter settlers and traditional peasants. Rent is not only appropriated from capitalists. It can be levied from workers, other members of the bourgeoisie (financiers, professionals, retired businessmen, other landlords, etc.), as well as from the state, cultural, religious and educational organizations, etc. Rent can be appropriated off the circulation of revenues of all sorts. We can hardly use Marxs categories (which deal solely with the circulation of capital) to explain the rent paid by company executives for penthouses in Paris or London, the rent paid by rich retirees in Florida, etc. Yet we have to find some way to see through the crazy patchwork quilt of social relations which arise out of such forms of rental appropriation. Marxs analysis is helpful in two respects. First of all, it indicates that there must be some sort of aggregate relationship between the circulation of capital and rental appropriation. At its simplest we could argue that if all surplus value was appropriated as rent then there would be no room for accumulation of capital. Unfortunately even that simple identity breaks down if we conceive of rental appropriation as a mere moment in the circulation of revenues. Landlords may receive a large portion of surplus value but they, in turn, spend the money they

receive on goods and services. In the end it is the continuous flow of money that is important. This view of value in motion is vital to Marxs conception of capital and properly carries over to the study of the circulation of revenues. We must think, therefore, of the ratio between two flows - of revenue and capital - and try to situate rent as a social relation of momentary appropriation from both flows (both capital and revenue) based on the mere fact of land and property ownership. There is, evidently, plenty of work to be done on the theory of these relationships. And what of rent appropriated from the working class? Clearly, as Engels argued, this is a secondary form of exploitation. It is nevertheless deserving of analysis. In this case rent is appropriated off of variable capital, but insofar as wage rates reflect housing costs then the rate of surplus value should diminish with rising rents and vice versa. On this basis Engels attacked those who sought a solution to the housing question in the absence of any attack upon the wages question. But there is a lot more to it than that. The manner, extent and form of rental appropriation has important economic, social and ideological consequences - witness the debate over the politics of homeownership for the working class, and the effects of socializing housing provision in many of the advanced capitalist countries. Furthermore, to the degree that elements within the working class become property owners, they, too, can seek to appropriate rents from fellow-workers. We then encounter the theoretical problem of how to account for rental payments in establishing the value of labor power as a datum for analysis. Analysis of such questions reveals some interesting insights. For example, if workers receive a uniform wage, then some who live close to work will have lower costs of reproduction because of low transport costs while others will pay more if they live further away. Properly structured rents on working class housing could then have the effect of equalizing the real wage to workers at different locations (the analogy with differential rent on capital is exact). The relationships between land and property rent, transport availability and cost, then come into play. The problem, of course, is that there is nothing in the power relations between landowners and workers to ensure that rents are properly structured in the first place. Furthermore, workers also compete for living space against capitalists (both producers and consumers). The level of appropriation of rent from one kind of revenue cannot be understood without reference to levels of appropriation from other forms of revenue as well as from capital itself. The full theory of such relationships remains to be worked out. Marxs theory of rent is partial because it deals solely with the circulation of capital and excludes any direct analysis of the circulation of revenues. We cannot, therefore, simply take Marxs categories and make them work in the actual analysis of the total complex of land and property markets (particularly in urban areas). Something more is involved even presuming a society dominated by a purely capitalist mode of production. And that something more is the circulation of revenues, albeit in relation to the circulation of capital which always remains as its basis.
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4. CONCLUSION
Rent is, we repeat, simply a money payment for the use of land and its appurtenances. This simple money payment can conceal a host of possible social significations that can be unravelled only through careful sociohistorical investigation. The task of theory under such circumstances is to establish the underlying forces that give social meaning to and fix the level of the rental payment. Under a purely capitalist mode of production these forces merit disaggregation into those which attach to the circulation of capital and those which relate to the circulation of revenues (while recognizing that the two circulation processes are dependent upon each other). Additional complications arise because it is not always easy to distinguish between interest on capital fixed in land (interest on buildings and permanent improvements) and rent on land pure and simple. Furthermore the different uses of land as a means, condition, or element of production, or as a reservoir of present or potential use values, means that the significance of land to users varies from sector to sector. Project all of these complexities into the framework of land use competition in which land is just one out of several different forms of fictitious capital (stocks and bonds, government debt, etc.) competing for investment, and we are forced to conclude that there is nothing simple about that simple money payment even under conditions of a purely capitalist mode of production. But the notion of a purely capitalist mode of produc-

tion is at best a convenient fiction, more or less useful depending upon historical circumstance. And many situations indeed arise in which the dominant forces underlying the rental payment can best be understood in terms of the articulation of quite different modes of production, one upon the other. To the degree that each mode of production has associated with it a specific system of revenue circulation (based upon distinctive form of distribution), all of the complexity established for a purely capitalist mode of production becomes compounded many times over. I d o not regard the rich complexity of these theoretical determinations as anything other than an exciting challenge to bring the theory of rent out from the depths of underlying simplicity (where some Marxists seek to confine it in perpetuity), step by step towards the surface appearance of everyday life. 1 believe that the framework 1 have outlined here can have as much to say about circumstances as diverse as Soissonais, Iowa, Mexico City, Sydney and Kinshasa. The theory does not tell us the answers but it does help us pose the right questions and give meaning to otherwise incomprehensible phenomena. It might also help us to get back to some basic issues about class structures, class alliances, and the role of landownership as a form of social power in a given social formation. And all of this can be done, 1 would submit, without refuting or going beyond supposedly outdated Marxian formulations, but simply through the proper application of Marxs own methods to a question that he never himself resolved to his own satisfaction.

REFERENCES
Engels, F., The Housing Question (International Publishers, New York; 1935 Fine, B., On Marxs theory of agricultural rent, Economy and Society, 8 (1979), 241-78. Harvey, D., The Limits to Capital (Basil Blackwell, Oxford; 1982). Marx K., The Poverty of Philosophy (International Publishers, New York; 1963). Marx K., Capital (3 Vols, International Publishers, New York; 1967). Marx, K., Theories of Surplus Value (3 Parts, Lawrence and Wishart, London; 1969 and 1972). Marx, K., and Engels, F., Selected Correspondence (Progress Publishers, Moscow; 1955). Postel-Vinay, G., La Rente Fonciere dans le Capitalisme Agricole (Maspero, Paris; 1974). Rey, P-P., Les Alliances de Classes (Maspero, Paris; 1973). Tribe, K., Land, Labour and Economic Discourse (Routledge and Kegan Paul, London; 1978).

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